Rims publishes guide to reservation of rights

Rims has produced a guide for risk managers on dealing with reservation of rights letters from insurers. The report, A Risk Management Guide to Reservation of Rights, is designed to help insureds understand, anticipate and properly respond to reservation of rights letters.

The report was developed by members of the Rims Standards and Practices Council, and aims to guide risk professionals in understanding the potential implications that reservation of rights letters pose. The report explains the background of these notifications and discusses what to consider when deciding if, when and how to respond. It includes examples of reservation of rights and response letters, while exploring issues regarding claim limitations, communications strategies, litigation and potential conflicts of interest.

“It may be surprising when a claim is reported, and an insurer sends the policyholder a reservation of rights letter, potentially limiting coverage,” said Rims vice president of strategic initiatives, Carol Fox. “Knowledgeable and prepared risk professionals can make all the difference in getting the full value from an organisation’s insurance policies.”

The guide states: “Reservation of rights letters pose a significant challenge to an entity’s ability to realise the full value of its insurance policies in covering its claims…Given that reservation of rights notice of limitations have been upheld in court, risk managers and legal counsel should not dismiss the importance of a timely response. Receipt of a reservation of rights notice should prompt a review by risk managers – ideally, in conjunction with legal counsel – leading to an informed decision and deliberate action: whether to accept the insurer’s interpretation of the coverage and defence obligations, or respond with a reservation of its own rights. If not, unexpected and unintended consequences may result.”